Moneywise Mortgage Awards 2016
Buying a house can be a very emotional purchase. Whether you are taking your first, brave step on to the property ladder or expanding your family and searching for your ‘forever home’, it is easy to get lost in the excitement of colour schemes, furniture and potential renovations.
What will usually stand between you and your desired property is the rather less exciting consideration: the mortgage you’ll need to fund it. But the more time you put into finding the right home loan for you, the more money you’ll hopefully have to turn the property into your home.
Choosing a mortgage isn’t always easy and the right one for you will depend on a whole host of factors. Many buyers will want to be confident that their repayments won’t rise, while others will be looking for a loan that they don’t need to keep switching. For cash-strapped first-time buyers, it may just be about seeking out the lender that will grant them a loan.
This is where the Moneywise Mortgage Awards come in. With the help of our panel of expert judges, we can reveal the lenders that over the past year have offered the right products for your needs, across eight different categories. Many of these have consistent track records of winning our mortgage awards, meaning they are likely to continue to meet your needs.
The awards aren’t just for home buyers, however. If you think you are paying over the odds on your current mortgage, our awards can help you find a better deal. Alternatively, if you are considering investing in property, our buy-to-let category is there to help you.
Best lender for fixed rates
Winner: Yorkshire Building Society
Highly commended: Halifax
The Bank of England’s base rate has stood at 0.5% since March 2009, but while it may be showing no imminent signs of moving, when it does it is likely to only head in one direction – up.
For this reason, the vast majority of borrowers today want the certainty that when interest rates do rise, their mortgage payments won’t. This makes the fixed-rate market fiercely competitive, and that was reflected in this year’s award, which was almost too close to call. Yet despite fixed rates being something of a battleground for lenders, our winner, Yorkshire Building Society, continues to lead the charge and takes the crown for the fourth year in a row.
Aaron Strutt, judge and product and communications manager at Trinity Financial, says Yorkshire Building Society is strong on both price and choice. “The lender regularly offers the lowest fixed rates and tops the best- buy tables. It has a huge range of fixes for customers to choose from and a selection of arrangement fees,” he explains.
Taking runner-up position this year is Halifax, which has made great strides in the market over the past 12 months, according to judge Andrew Montlake, a director at Coreco. “Halifax has had an excellent year and really came to the fore on fixed rates across the board, backed with good service and underwriting policies, especially for first-time buyers,” he says.
Best lender for discounts
Winner: Principality Building Society
Highly commended: Hanley Economic Building Society
The rate charged on a discount mortgage is based on a reduction of the lender’s standard variable rate for a specified period of time. As such, the rate can move up and down when interest rates change. Historically, discount mortgages were cheaper than fixed-rate mortgages, but competition at this end of the market means there may be little difference between fixed and variable rates.
As a result, they are nowhere near as popular as they once were and the winner of the past two years in this category, HSBC, is (like many of the larger banks) not currently active in this part of the market. This is despite offering some fantastically cheap deals, (including a two-year discount at less than 1%) over the past year.
While consumer demand may be for fixes, Mr Strutt says the discount mortgage still plays an important role in maintaining choice for all borrowers. “More lenders are offering higher loan-to-value (LTV) discounted mortgages, so they are targeting first-time buyers rather than the more traditional or possibly less mainstream borrower often securing finance through the building societies,” he says.
The award this year goes to Principality Building Society, last year’s runner-up, which Mr Strutt praises for maintaining choice.
Alistair Hargreaves, judge and executive mortgage and protection consultant at John Charcol, adds that “it offers sensible underwriting from a regional lender”.
Hanley Economic Building Society takes the runner-up position. Judge David Hollingworth, associate director communications at London & Country, says: “The Hanley distinguishes itself with exceptionally good discounts and it has consistently offered early repayment charge-free options, which should appeal to borrowers in the face of potential rate rises to come.” Mr Hargreaves also praises its flexible underwriting. “It has looked at some really unusual deals for me in the past,” he says.
Best lender for offset mortgages
Winner: Scottish Widows
Highly commended: Barclays
These home loans give borrowers the opportunity to offset any savings they might have against their mortgage. So, for example, if you had £125,000 outstanding on your mortgage but also held £25,000 in a linked savings account, your mortgage interest would only be calculated on an outstanding balance of £100,000. This allows you to either reduce the amount of interest you pay each month or speed up the rate at which you clear the mortgage.
This can make them a good option for people with a large amount of money in savings. Winning the award comfortably for the second year in a row is Scottish Widows Bank.
Mr Strutt says: “Scottish Widows has offered great rates for some time and provides customers with an offset facility on all of its mortgages at no extra cost.”
Mr Strutt is also a fan of Barclays, which takes the runner-up position in this category. He adds: “Many of the banks and building societies have pulled back from providing offset mortgages, but Barclays has been actively pushing them. Its great rates and positive marketing campaign are helping to make offset mortgages more popular again.”
However, unlike Scottish Widows, Barclays only offers offset features on its tracker mortgages.
Best lender for buy to let
Winner: BM Solutions
Highly commended: Coventry Building Society
By reducing tax relief on mortgage interest payments and increasing the rate of stamp duty that is payable on investment properties and second homes, the government is making it harder for amateur investors to make money from property. This means it’s increasingly important for those landlords who want to either enter or remain in the market to get the best deal that they can.
The clear winner this year is BM Solutions, which takes the prize for the second consecutive year. Mr Hollingworth describes BM Solutions as “a lender that really knows the buy-to-let market and what landlords want”.
He adds: “Always well placed and holding excellent criteria, BM Solutions continues to be the lender of choice for very many borrowers.”
Coming in second place is Coventry Building Society. Mr Hargreaves says it provides “great rates, quick service, free valuations” and “is always reliable”.
Best lender for first-time buyers
Winner: Yorkshire Building Society
Highly commended: HSBC and Tesco Bank
With rising house prices, stagnant savings rates and tightened lending criteria making homeownership ever more elusive, first-time buyers need every little bit of help from lenders to buy their own home. Taking the award this year is Yorkshire Building Society, which has been leading the charge in this highly competitive sector of the market.
“Over the past year, Yorkshire has played its part in driving down rates for first-time buyers. It was one of the first lenders to start offering 5% deposit mortgages again and often topped the low-deposit best-buy tables,” remarks Mr Strutt.
Mr Hollingworth adds: “Yorkshire has a wide range of options with big incentives for first-time buyers, including free valuations and hefty cashbacks.”
With our judges unable to agree on which lender should take second place, we have joint runners-up for this prize: HSBC and Tesco Bank. Mr Montlake says HSBC offers “good rates on a consistent basis with inbuilt flexibility” while Mr Hollingworth praises Tesco Bank’s commitment to first-time buyers. “Tesco has shown a real appetite to maintain a competitive proposition for those with smaller deposits and spent much of the year leading high LTV products.”
Best lender for lifetime trackers
Winner: Coventry Building Society
Highly commended: HSBC
Lifetime trackers are variable rate mortgages that rise up and down usually in line with interest rate movements for the life of the loan. They are popular among borrowers who do not want to keep switching their mortgage.
The winner this year is Coventry Building Society. Mr Hargreaves says it offers a “very competitive lifetime variable with no early redemption charges and free valuations backed up with great service”, while Mr Montlake commends its “personal approach”. Hot on Coventry’s heels is our runner-up, HSBC. Mr Hollingworth says it has offered “great rates all year and one of very few lenders offering these products consistently and never straying far from the top of the pile”.
Best for remortgages
Highly Commended: Virgin Money
New mortgages aren’t just for homebuyers. If your fixed or discount rate has run out and you are stuck paying your lender’s standard variable rate, existing homeowners may be able to save hundreds of pounds each month by switching to a better deal.
This year, the judges voted for Barclays, which takes the award for the second year in succession.
Mr Strutt says: “Barclays has offered some cracking remortgages over the past year and, with its enhanced income multiples, it has really been the lender to beat. Its tracker rates have been particularly good and switch-to-fix options enable customers to lock into a fixed rate when the Bank of England finally raises the base rate. Barclays also offers a remortgage service to reduce the cost of switching lenders.”
Virgin Money comes in second place. Mr Strutt says: “Virgin Money has been pushing hard to attract more customers and it has had great rates to tempt borrowers. The lender has also been offering exclusive rates, often undercutting the standard range.”
Innovator of the year
Winner: Hodge Lifetime
Highly Commended: Bath Building Society
Lenders are continually developing their products to make them stand out from the crowd. However, there can often be a fine line between genuine product development and gimmicks that serve only to whet borrowers’ appetites and offer limited long-term value.
This award rewards those lenders offering innovations that make a difference to borrowers. Our winner this year is Hodge Lifetime for its new 55-plus mortgage, which provides loans to borrowers up to the age of 95.
Mr Montlake says: “One of the hottest topics in the mortgage market over the past year has been that of age-related policies, with lenders coming under fire for not being able to cater for an ageing population and borrowers working, living and therefore wishing to remain in their properties longer.
“While some building societies have started to address this, bespoke products offering a real alternative have been thin on the ground, and this is where Hodge Lifetime has stepped in.
Available to those over the age of 55, this product allows borrowing up to £500,000 on an interest-only basis up to age 95.”
Moneywise also believes that Bath Building Society deserves recognition for its Rent a Room mortgage, which takes the highly commended award in this important category.
Mr Hollingworth says: “This is a great example of a smaller, mutual, lender taking advantage of its more flexible underwriting to create an innovative product. Recognising that many homeowners will generate an additional income through lodgers, it took the chance to do something that most lenders will not and factor that income into the affordability calculation.”
The shortlists were compiled for us by Trinity Financial and were based on best buy data over the last 12 months. These shortlists featured the lenders that offered the most competitive rates throughout the year. The shortlists were passed to our panel of judges who were asked to select winners and runners up for each category based not only on rates but also on fees, penalties, lending flexibility, service standards and the treatment of new and existing customers.
They also considered relationship between bank base rate and mortgage rate and the value of any freebies including free legal work. Judges nominated lenders for the innovator of the year award. However, the final decision was made by the Moneywise editorial team.
- The Moneywise Mortgage Awards 2016 were judged by a team of mortgage experts.
- Aaron Strutt, product and communications manager at Trinity Financial
- David Hollingworth, associate director communications, London & Country Mortgages
- Andrew Montlake, director, Coreco
- Alistair Hargreaves, executive mortgage and protection consultant at John Charcol.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Early redemption charges
You may think a lender would be grateful to you for paying off your debts early. Alas, no. Mortgages and loans levy early repayment (or redemption) charges because the profitability of your loan or mortgage to the lender is calculated on the basis that you’ll pay every payment (see APR). To pay the loan/mortgage off early – even to remortgage – means the lender will make less profit and so claws back potential lost profit with an ERC, which could be three months’ interest. The earlier into the term you repay the loan, the higher the ERC might be.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.